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German Inflation Jumps to Fastest Since 2013

German Inflation Jumps to Fastest Since 2013German Inflation Jumps to Fastest Since 2013

The pace of German inflation more than doubled in December, driven by a surge in oil that is set to mask continued weakness in underlying price pressures in the months ahead.

Consumer prices rose 1.7% from a year ago, recording the biggest jump on record, the Federal Statistics Office in Wiesbaden said on Tuesday, Bloomberg reported.

Economists surveyed by Bloomberg predicted an increase to 1.3%. The reading is the strongest since July 2013 and follows a rate of 0.7% the previous month. Prices rose 1% from November.

The increase takes inflation in the region’s largest economy close to the European Central Bank’s definition of price stability of just under 2%, providing ammunition for some officials pushing for a gradual exit from unconventional stimulus.

President Mario Draghi has argued that a decision last month to extend bond buying for longer than anticipated but at a slower pace reflected a “firming” euro-area recovery and “still subdued” core price gains.

“The key question will be by how much higher energy prices will feed into other prices,” said Holger Sandte, chief European analyst at Nordea Markets in Copenhagen. With the main driver of the December pickup a base effect from past oil-price declines, “we expect a very gradual increase in core inflation both for Germany and the euro area.”

The cost of Brent crude surged 12.6% in December, recording the biggest monthly increase since April. Prices are set to rise further as the Organization of Petroleum Exporting Countries and 11 other nations started to cut output on Jan. 1 in an effort to reduce bloated global inventories.

Prices for heating oil in Germany rose annually for the first time in four years in December. Most states reported increases of more than 20%, contributing as much as 0.3%age point to inflation rates.

Fuel was also significantly more expensive, with year-over-year price gains exceeding 5% in all regional reports published Tuesday. Food prices jumped at least 3% in the majority of states.

 

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